Protect Your Business with Chargeback Insurance

May 15, 2018

Though 82% of the 1,000 online, multi-channel and mobile commerce merchant surveyed dispute chargebacks, many indicated that they lack the necessary expertise to get them reversed, according to Kount’s State of Chargebacks 2018. The long, tedious process surrounding the dispute process, as well as merchants’ lack of skills  and knowledge to get chargebacks reversed, are why one-fifth of merchants win less than 15% of their disputes and one-third win less than 30% of their disputes.

With those odds, it seems like merchants have no way to win battle chargeback. The best way to keep your business from jeopardizing your merchant account, which along with a payment gateway is necessary for accepting and processing credit card transactions, is to take steps to prevent chargebacks. Prevention begins by knowing the sources of your chargebacks and then, taking appropriate actions to stop them. In addition to third-party fraud mitigation tools and alert systems, chargeback insurance is a solid way to protect your business.

What is Chargeback Insurance?

Chargeback insurance protects a merchant against unauthorized, fraudulent credit card transactions. The insurance covers the loss of the stolen service or product and the loss of profit due to the theft. Oftentimes, a policy will cover any credit charges due to a card being lost or stolen that occurred before the cardholder became aware of them and reported them.

Sometimes, chargeback insurance is included with a merchant account. If not, a merchant account provider often can steer you in the right direction where you can get this coverage.

What Chargeback Insurance Doesn’t Cover

It is important to remember than no coverage will protect you from everything. In many cases, chargeback coverage won’t apply if a chargeback is the result of a customer failing to receive an item or receiving one that was broken or damaged. Also, don’t expect it to cover your mistakes, such as double-billing customers. Also, it is very rare for any coverage to apply to the sale of digital merchandise, such as online videos, apps, or e-books.

Is Chargeback Insurance Right for Your Business?

Fraud and friendly fraud are the two primary sources of chargebacks. If most of your chargebacks are due to legitimate fraud – transactions made without authorization or completed with a stolen credit card – then, chargeback insurance makes sense. In those circumstances, it is very likely that coverage will apply.

If most of your chargebacks come from friendly fraud – when customers claim they didn’t get items just so they don’t have to be on the hook for paying for them – then, you may want to reconsider. Insurance doesn’t cover these types of chargebacks. Also, don’t forget that an insurance policy cannot alter your chargeback ratio. Though coverage can recover any profit losses, you will still have those chargebacks in your history unless you get them reversed.

The Final Say

If you are thinking about chargeback insurance, think about getting it along with a chargeback mitigation system. A system, such as the one offered by EMB, will alert you to disputes and give you a chance to resolve them before they become chargebacks. EMB’s alert system can prevent one in four chargebacks. By using both, you will be increasing your chances of keep ratios low and get reimbursements for any items or profits lost due to fraud.

An approach that considers the entire picture and covers all its bases is always the best way to go.


*Disclaimer: Chargeback Shield is not an insurance service. EMB does not sell insurance and Chargeback Shield is not insurance, it is an alert system.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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